It seems that it is necessary to enable Gaia profile info, however (at least in Chrome Canary) you can now do this from chrome://flags rather than having to run the app with the dipswitch on the command line. Also, on OSX the path looks more like this: ~/Library/Application Support/Google/Chrome Canary/Default/Preferences
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Jon zSep 8 '13 at 15:24

Quit Chrome (ensure you don't have any running)
Find the Chrome application directory (e.g., on windows, it is %USERPROFILE%\AppData\Local\Google\Chrome\User Data
Put your new avatar png file in the "Default" subdirectory.
Edit "Local State" in a good text editor
Find the "profile" section; it resembles this: